(a) IN GENERAL.—Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:

‘‘(h) APPLICATION TO CORPORATIONS.—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation

that is not an organization exempt from tax under section 501(a). ‘‘(i) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.’’.

(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.— Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended— (1) by inserting ‘‘amounts in consideration for

property,’’ after ‘‘wages,’’, (2) by inserting ‘‘gross proceeds,’’ after ‘‘emoluments, or other’’, and (3) by inserting ‘‘gross proceeds,’’ after ‘‘setting forth the amount of such’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after December 31, 2011.

What does this all mean?

At the end of the year, businesses gather up all income and expenses and subtract expenses from income and hope that there is a profit.

If you hired someone during the fiscal year and paid more than $600 for their service, you have to issue a 1099-MISC to that individual. Under this new law, in addition to issuing 1099s to individuals, companies are now required to file 1099s for every corporation from whom they purchase more than $600 worth of goods or services in a given fiscal year. And each business/individual will receive a 1099 from each business to which you sold over $600 of goods or services.

This will create increase the amount of paperwork for small businesses across the country.

Everything Reportable

"Voluntary information reporting improves tax compliance without raising taxes on small businesses, which is why Presidents G. W. Bush and Obama both proposed similar policies to this one," wrote the committee staffer in an email to Budget & Tax News.

Tax experts say there's one potential upside in the new law for business owners: Eliminating the corporate and goods exemptions at least means businesses will no longer have to pore over every transaction to figure out whether it needs a 1099—if it crosses the $600 threshold, it's in. Couch says her firm already recommends collecting tax data on all vendors because the IRS requires businesses have it on hand at the time of the transaction or face backup withholding penalties.

"There are probably going to be some hiccups along the way because systems will need to be redesigned," says Couch. "But overall I believe it will make compliance on the payer end a lot more streamlined and easier. Because you don't have to have a lot of staff figuring out if they go in the reportable or the non-reportable box. Now everything is going to go into the reportable box."

Although the IRS has yet to issue final regulations on the new law specifying how the provisions will be implemented, Congressional opponents of the move aren't taking any chances. Rep. Dan Lungren (R-CA) has already introduced legislation to repeal the new 1099 requirements, garnering more than 50 House cosponsors.